SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Check One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 0-16577
CYBEROPTICS CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1472057
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5900 Golden Hills Drive, Minneapolis, Minnesota 55416
(Address of principal executive offices)
(612) 542-5000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 10, 1998, 5,048,430 shares of the issuer's Common Stock, no par value,
were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CYBEROPTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 1998 DEC. 31, 1997
(UNAUDITED)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 9,636 $ 6,160
Marketable securities 20,996 20,577
Accounts receivable, net 7,401 7,697
Inventories 5,845 4,611
Other current assets 1,440 1,343
- ------------------------------------------------------------------------------------------------
Total current assets 45,318 40,388
Marketable securities 9,510 14,290
Equipment and leasehold improvements, net 2,957 2,661
Capitalized patent costs, net 129 106
- ------------------------------------------------------------------------------------------------
Total assets $57,914 $57,445
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,248 $ 1,205
Income taxes payable 611 661
Accrued expenses 2,131 2,286
- ------------------------------------------------------------------------------------------------
Total current liabilities 3,990 4,152
Commitments and Contingencies
Stockholders' equity:
Preferred stock, no par value, 5,000 shares
authorized, none outstanding
Common stock, no par value, 25,000 shares
authorized, 5,228 and 5,341 shares issued
and outstanding, respectively 36,448 38,437
Retained earnings 17,476 14,856
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 53,924 53,293
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $57,914 $57,445
================================================================================================
</TABLE>
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CYBEROPTICS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED JUNE 30,
1998 1997
- -----------------------------------------------------------------------
Revenues $9,718 $8,257
Cost of revenues 4,401 3,855
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Gross margin 5,317 4,402
Research and development expenses 1,944 1,552
Selling, general and administrative expenses 2,418 2,195
- -----------------------------------------------------------------------
Income from operations 955 655
Interest income 597 536
- -----------------------------------------------------------------------
Income before income taxes 1,552 1,191
Provision for income taxes 500 382
- -----------------------------------------------------------------------
Net income $1,052 $ 809
=======================================================================
Net income per share - Basic $ 0.20 $ 0.16
Net income per share - Diluted $ 0.19 $ 0.15
=======================================================================
Weighted average shares outstanding - Basic 5,392 5,215
Weighted average shares outstanding - Diluted 5,575 5,448
=======================================================================
SIX MONTHS ENDED JUNE 30,
1998 1997
- -----------------------------------------------------------------------
Revenues $20,348 $15,337
Cost of revenues 8,848 7,229
- -----------------------------------------------------------------------
Gross margin 11,500 8,108
Research and development expenses 3,788 2,978
Selling, general and administrative expenses 5,052 4,104
- -----------------------------------------------------------------------
Income from operations 2,660 1,026
Interest income 1,190 1,029
- -----------------------------------------------------------------------
Income before income taxes 3,850 2,055
Provision for income taxes 1,230 657
- -----------------------------------------------------------------------
Net income $ 2,620 $ 1,398
=======================================================================
Net income per share - Basic $ 0.49 $ 0.27
Net income per share - Diluted $ 0.47 $ 0.26
=======================================================================
Weighted average shares outstanding - Basic 5,382 5,199
Weighted average shares outstanding - Diluted 5,619 5,417
=======================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM FINANCIAL CONSOLIDATED STATEMENTS.
<PAGE>
CYBEROPTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
SIX MONTHS ENDED JUNE 30,
1998 1997
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,620 $ 1,398
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 536 444
Provision for losses on inventories 221 198
Changes in operating assets and
liabilities:
Accounts receivable 296 (694)
Inventories (1,455) (1,142)
Other current assets (97) 254
Accounts payable 43 79
Income taxes payable (50) 548
Accrued expenses (155) 245
- -----------------------------------------------------------------------------
Net cash provided
by operating activities 1,959 1,330
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities 14,882 9,726
Purchases of marketable securities (10,521) (10,978)
Additions to equipment and leaseholds (798) (298)
Additions to patents (57) (38)
- -----------------------------------------------------------------------------
Net cash provided (used) by
investing activities 3,506 (1,588)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 419 288
Repurchase of common stock (2,459) (561)
Other 51
- -----------------------------------------------------------------------------
Net cash used by financing
activities (1,989) (273)
Increase (decrease) in cash and cash equivalents 3,476 (531)
Cash and cash equivalents - beginning
of period 6,160 3,453
- -----------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 9,636 $ 2,922
=============================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM REPORTING:
The interim consolidated financial statements presented herein as of June 30,
1998, and for the three and six month periods ended June 30, 1998 and 1997, are
unaudited; however, in the opinion of management, the interim consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial position,
results of operations and cash flows for the periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
condensed or omitted pursuant to SEC rules and regulations.
The results of operations for the three and six month periods ended June 30,
1998, do not necessarily indicate the results to be expected for the full year.
These unaudited interim consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and notes
thereto, contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
The December 31, 1997, consolidated balance sheet data derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.
2. STOCK REPURCHASE:
In December 1996, the Company's Board of Directors authorized the repurchase of
up to 500,000 shares of common stock. During the first quarter of 1997, the
Company repurchased 41,000 shares of common stock under the authorization which
expired in December 1997. In February 1998, the Board of Directors authorized
the repurchase of an additional 500,000 shares, at such times and at such prices
as a committee of the Board of Directors determines. As of August 10, 1998,
369,500 shares have been repurchased under the February 1998 authorization.
Repurchased shares will be utilized for employee compensation plans and other
corporate purposes.
3. INVENTORIES (IN THOUSANDS):
June 30, Dec. 31,
1998 1997
(unaudited)
--------------------
Raw materials $4,457 $3,027
Work in process 793 1,106
Finished goods 595 478
-------------------
Total inventories $5,845 $4,611
===================
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
4. NET INCOME PER SHARE:
Basic net income per share has been computed using the weighted average number
of shares outstanding. The diluted net income per share includes the effect of
common stock equivalents for each period. The number of shares utilized in the
denominator of the diluted net income per share computation as compared to the
basic net income per share computation has been increased by 237,000 and 218,000
shares for the six month periods and by 183,000 and 233,000 for the three month
periods ended June 30, 1998 and 1997. Options to purchase 104,000 and 191,000
shares of common stock at a weighted average price of $22.77 and $17.30 were
outstanding but were not included in the computation of diluted net income per
share for the six month periods ended June 30, 1998 and 1997 as the exercise
price was greater than the average market price of the common shares. For the
three month periods ended June 30, 1998 and 1997, options to purchase 214,000
and 131,000 shares of common stock at a weighted average price of $21.12 and
$17.80 were not included in the computation of diluted net income per share.
5. COMPREHENSIVE INCOME:
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130
establishes new rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on the Company's net income.
SFAS 130 requires unrealized gains and losses on the Company's
available-for-sale securities to be included as a component of other
comprehensive income.
During the six months ended June 30, 1998 and 1997, total comprehensive income
amounted to $2,635,000 and $1,398,000, respectively. During the three month
period ended June 30, 1998 and 1997, total comprehensive income amounted to
$1,052,000 and $809,000, respectively. Accumulated other comprehensive income at
June 30, 1998 and December 31, 1997 was $41,000 and $26,000, respectively.
6. RECLASSIFICATIONS:
Certain reclassifications have been made in the statement of cash flows for the
six month period ended June 30, 1997 to conform to the classifications used
during the six month period ended June 30, 1998. These reclassifications had no
effect on net income or stockholders' equity.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected the Company's results and financial position during
the periods included in the accompanying financial statements. This discussion
should be read in conjunction with the financial statements and associated
notes.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The following Management's Discussion
and Analysis contains "forward looking statements" within the meaning of federal
securities laws which represent management's expectations or beliefs relating to
future events, including statements regarding levels of orders, taxation levels,
the sufficiency of cash to meet operating and capital expenses and the ability
to continue to price foreign transactions in U.S. currency. These, and other
forward looking statements made by the Company, must be evaluated in the context
of a number of factors that may affect the Company's financial condition and
results of operations, including the following:
-- The cyclical nature of capital expenditures in the electronics
industry;
-- The dependence of such operations on orders from several large OEM
customers;
-- The dependence of the Company's manufacturing on outside contractors
and suppliers;
-- The degree to which the Company is successful in protecting its
technology and enforcing its technology rights in the United States
and other countries;
-- The dependence of the Company's operations on several key personnel;
-- The speed of changes in technology in the microelectronics
manufacturing industry from which most of the Company's sales are
derived;
-- The significant proportion of the Company's revenue that is derived
from export sales;
-- The recent devaluation of many Asian currencies and the relatively
higher local currency cost of the Company's products sold into these
markets;
-- Competition for the functions that the Company's products perform by
larger "vision" technology companies and by other optical sensor
companies;
-- Quarterly fluctuations in operating results caused by the timing of
shipments and other factors not entirely within the Company's control.
These and other factors that may affect future operations are discussed in more
detail in Exhibit 99 to this Form 10-Q and in the Company's other filings with
the Securities and Exchange Commission.
<PAGE>
RESULTS OF OPERATIONS
The table below lists certain financial data expressed as a percentage of
revenues for the periods ended June 30, 1998 and 1997.
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------------- ------------------
Revenues 100% 100% 100% 100%
Gross margin 55% 53% 57% 53%
Research and development expenses 20% 19% 19% 19%
Selling, general and
administrative expenses 25% 27% 25% 27%
Income from operations 10% 8% 13% 7%
Net income 11% 10% 13% 9%
REVENUES
Revenues increased 33% to $20.3 million during the six month period ended June
30, 1998 compared to $15.3 million for the comparable period in 1997. For the
second quarter of 1998, revenues increased 18% to $9.7 million from $8.3 million
in the second quarter of 1997. Increased revenues are primarily the result of
growth in demand for surface mount technology (SMT) process control sensors,
primarily LaserAlign and Laser Lead Locator, from original equipment
manufacturer (OEM) customers and the resulting change in the level of unit
shipments. Revenues from SMT sensor products increased 62% to $15.4 million
during the six months ended June 30, 1998 compared to 1997, and increased 49% to
$7.2 million for the second quarter of 1998 compared to the second quarter of
1997. The Company's two largest customers, Juki Corporation (Juki) and Philips
Electronics, N.V. (Philips), accounted for approximately 35% and 22% of revenues
for the six months ended June 30, 1998 compared to 25% and 6% during the same
period in 1997. For the second quarter, Juki and Philips accounted for
approximately 37% and 27% of revenues in 1998 compared to 26% and 11% in 1997.
The Company's five principal OEM customers (including Juki and Philips) in the
aggregate accounted for 71% and 52% of revenues for the six month periods ended
June 30, 1998 and 1997, and 71% and 54% of revenues for the second quarter of
1998 and 1997.
During the second quarter of 1998 the Company was notified by its largest OEM
customer that there would be a reduction in its previously forecasted third
quarter order rate, primarily as the result of weak economic conditions in Japan
and other Asian countries. As a result, the Company expects a significant
reduction in SMT sensor revenues during the third quarter of 1998 compared to
the third quarter of 1997 and the second quarter of 1998.
SMT system revenues decreased 26% to $2.8 million during the six month period
ended June 30, 1998 from the comparable period in 1997, and decreased 38% to
$1.4 million for the second quarter of 1998 compared to the second quarter of
1997. SMT system revenues result from shipments of the Company's CyberSentry and
LSM solder paste inspection products. The decrease in SMT systems revenues is
primarily the result of reduced demand from our North American end-user system
customers reflecting reduced capital spending due primarily to weak demand for
their products in Asia.
<PAGE>
Industrial measurement systems and sensor products revenues decreased 39% to
$819,000 during the six month period ended June 30, 1998 from the comparable
period in 1997, and decreased 24% to $607,000 for the second quarter of 1998
compared to the second quarter of 1997. However, industrial measurement sales
increased significantly from the first quarter of 1998 due to the initial impact
on revenues of new product introductions. Revenues from industrial measurement
have been declining in recent quarters primarily as the result of product
changeovers in both the systems and sensor product lines. A new family of
general measurement sensors was released during the fourth quarter of 1997, and
a new family of general measurement systems was introduced late in the first
quarter of 1998. As a result of these new product introductions, the Company
believes that the dollar level of industrial measurement products revenues will
continue to increase during the second half of 1998, and become a larger
percentage of overall company revenues.
International revenues comprised approximately 81% and 67% of total revenues
during the six months ended June 30, 1998 and 1997, and approximately 84% and
61% of total revenues during the second quarter of 1998 and 1997. Sales of the
Company's products in Western Europe, Japan and the rest of the Far East have
increased significantly over each of the last six quarters. These international
markets account for a significant portion of the production capability of
capital equipment for the manufacture of electronics, the primary market for SMT
sensor and SMT systems products. Revenues generated from products used primarily
for SMT production have remained at approximately 90% of revenues during 1998
and 1997.
GROSS MARGIN
Gross margin increased as a percent of total revenues to 57% during the six
month period ended June 30, 1998 compared to 53% during the comparable period in
1997. For the second quarter of 1998, gross margin was 55% of total revenue
compared to 53% in the second quarter of 1997. The increase in gross margin is
primarily the result of increased revenue volume over which to spread the fixed
component of cost of revenues as well as manufacturing efficiencies. In
addition, a shift in revenue mix towards higher margin sensor products and
reduced warranty costs also had a positive impact on gross margin during the
first half of 1998 compared to the same period in 1997.
RESEARCH AND DEVELOPMENT
Net research and development expenses increased 27% to $3.8 million during the
six month period ended June 30, 1998 compared to $3.0 million during the
comparable period in 1997. For the second quarter of 1998, research and
development expenses increased 25% to $1.9 million from the comparable period in
1997. As a percentage of revenues, research and development expenses remained
flat at 19% for the six months ended June 30, 1998 and 1997, and for the second
quarter increased from 19% in 1997 to 20% in 1998. Research and development
expenses during the six months ended June 30, 1998 were primarily focused on
completion of the new family of industrial measurement scan stations and sensors
introduced during the fourth quarter of 1997 and the first quarter of 1998,
continuing development work on the LaserAlign technology and the development of
additional future product offerings for solder paste inspection.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 23% to $5.1 million
during the six month period ended June 30, 1998 compared to $4.1 million during
the comparable period in 1997. For the second quarter of 1998, selling, general
and administrative expenses increased 10% to $2.4 million compared to $2.2
million in 1997. As a percentage of revenue, selling, general and administrative
expenses have decreased from 27% in 1997 to 25% in 1998 for both the three and
six month periods. For the six month period ended June 30, 1998, the dollar
increase in selling, general and administrative expenses is primarily due to
increased compensation and related costs associated with the addition of a new
president and other senior executives, increased compensation costs added to
support the sales and service of the Company's product offerings and increased
legal costs primarily related to settlement of the Yamaha litigation. For the
second quarter of 1998, the increase is primarily due to increased personnel
costs offset by a reduction in legal costs due to the Yamaha litigation
settlement during the first quarter of 1998. The additional senior staff
reflects the recent reorganization into three business units, each focused on a
different served market.
EFFECTIVE INCOME TAX RATE
The Company's effective income tax rate was approximately 32% during the three
and six months ended June 30, 1998 and 1997. Benefits from the Company's foreign
sales corporation and the research and experimentation tax credit were primarily
responsible for reducing the effective tax rate below the statutory federal
rate.
ORDER RATE AND BACKLOG
CyberOptics' order rate totaled $16.6 million during the six month period ended
June 30, 1998 compared to $16.3 million during the same period in 1997. For the
second quarter of 1998, the order rate totaled $7.8 million compared to $8.0
million in 1997. Backlog totaled $4.9 million and $5.4 million at June 30, 1998
and 1997, respectively. The scheduled shipment of the June 30, 1998 backlog is
as follows (In thousands):
3rd Quarter 1998 $4,331
4th Quarter 1998 603
------
Total backlog $4,934
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and marketable securities decreased to $40.1 million
as of June 30, 1998 from $41.0 million as of December 31, 1997, primarily as the
result of $2.5 million in cash used to repurchase CyberOptics common stock and
$855,000 in fixed asset and patent additions. These uses of cash were partially
offset by $2.0 million of cash provided by operations and $470,000 of cash
provided by other common stock related financing activities. Marketable
securities generally consist of U.S. Government or U.S. Government agency
obligations with maturities of three years or less.
<PAGE>
The Company generated $2.0 million of cash from operations during the first six
months of 1998, primarily due to net income of $2.6 million, including $757,000
of non-cash expenses for depreciation and amortization and the provision for
inventory obsolescence and a $296,000 decrease in accounts receivable. These
increases in cash from operations were partially offset by an increase in
inventory of $1.5 million, resulting from inventory purchases to support a
higher than realized revenue base, new product introductions and volume last
time purchases of certain critical components. During the six months ended June
30 1997, the Company generated $1.3 million of cash from operations, primarily
due to net income of $1.4 million, including $642,000 of non-cash expenses, a
$254,000 decrease in other current assets and an increase in income taxes
payable of $548,000. These increases in cash were offset primarily by a $1.1
million increase in inventories and a $694,000 increase in accounts receivable.
The Company generated $3.5 million of cash from investing activities during the
six month period ended June 30, 1998 and used $1.6 million in the comparable
period in 1997. The majority of the increase in cash is the result of the timing
of purchases and sales of marketable securities, which provided $4.4 million of
cash in 1998 and used $1.3 million in 1997. The Company used $798,000 and
$298,000 of cash during 1998 and 1997 to purchase additional equipment and
leasehold improvements.
The Company used $2.0 million of cash as the result of financing activities in
the six month period ended June 30, 1998 and used $273,000 of cash for financing
activities during the comparable period in 1997. During the first six months of
1998 and 1997, cash was used for the repurchase of 174,500 and 41,000 shares,
respectively, of CyberOptics common stock. These uses of cash were partially
offset by cash generated primarily as the result of proceeds from the exercise
of stock options.
During the fourth quarter of 1997 and the first half of 1998, the Company has
been in the process of implementing a new enterprise business system. Total
external cost of implementation is anticipated to be approximately $775,000, the
majority of which will be capitalized and depreciated beginning on the date of
implementation. As of June 30, 1998, the Company has capitalized costs of
approximately $500,000 for the new system. Other than discussed above, the
Company has no material capital commitments. The Company believes current
working capital and anticipated funds from operations will be adequate for
anticipated operating and capital needs.
OTHER
Changes in revenue levels have resulted primarily from changes in the level of
unit shipments and new product introductions. The Company believes that
inflation has had no significant effect on operations. Substantially all of the
Company's international export sales are negotiated, invoiced and paid in U.S.
dollars.
The Company has analyzed the potential affect of the year 2000 issue on both the
system software included in the Company's equipment and on application software
licensed or purchased by the Company and used in its internal operations. The
Company has tested all of the system software included in its products and
determined that it is year 2000 compliant. In addition, the Company has
requested and received documentation from vendors supplying software for its
primary business applications addressing year 2000 compliance. In all cases,
vendor responses indicated that their applications were either currently year
2000 compliant or that they would be compliant by the end of 1998, although the
Company has not independently tested these applications for compliance. Based on
this analysis, the Company does not anticipate a material cost associated with
its systems relative to the year 2000 issue. Historical cost related to this
issue has been less than $100,000.
The Company is in the process of contacting all critical suppliers to verify
year 2000 compliance, and to date has not identified any issues. The Company is
not directly linked to any material supplier computer systems. The Company
currently feels that all recognized actions to address the year 2000 issue and
minimize its effect on the Company have been taken, and while no formal
contingency plan currently exists, appropriate actions will be taken if issues
are identified.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of CyberOptics Corporation was held at 3:30
p.m. on Monday, May 18, 1998. Shareholders holding 4,299,188 shares, or
approximately 79.49% of the outstanding shares, were represented at the meeting
by proxy or in person. Matters submitted at the meeting for vote by the
shareholders were as follows:
a. Election of Directors
The following nominees were elected to serve as members of the Board of
Directors until the annual meeting of shareholders in 1999 or until such
time as a successor may be elected:
TABULATION OF VOTES
----------------------------
FOR WITHHELD
--------- -------
Steve K. Case 4,181,006 118,182
Alex B. Cimochowski 4,181,006 118,182
George E. Kline 4,181,006 118,182
Steven M. Quist 4,181,006 118,182
P. June Min 4,180,982 118,206
Erwin A. Kelen 4,181,006 118,182
Kathleen P. Iverson 4,180,288 118,900
b. Approval of the 1998 Stock Incentive Plan
Shareholders approved adoption of the Company's 1998 Stock Incentive Plan
and reserved a total of 250,000 shares of common stock for issuance under
the plan by a vote of 3,420,748 shares in favor, 854,385 shares against,
24,055 shares abstained and 0 shares not voted.
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
a. Exhibits
Exhibit 27--Financial Data Schedule (For EDGAR filing only)
Exhibit 99--Forward Looking Statements Cautionary Statement
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1998, or during the period from June 30, 1998 to the date of this
quarterly report on Form 10-Q.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CyberOptics Corporation
/s/ John D. Beagan
-------------------
John D. Beagan, V.P. Operations and acting CFO
(Principal Financial Officer and
Duly Authorized Officer)
Dated: August 14, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CyberOptics Corporation
--------------------
John D. Beagan, V.P. Operation and acting CFO
(Principal Financial Officer and
Duly Authorized Officer)
Dated: August 14, 1998
EXHIBIT 99
FORWARD LOOKING STATEMENTS
CAUTIONARY STATEMENT
Statements regarding the future prospects of the Company must be
evaluated in the context of a number of factors that may materially affect its
financial condition and results of operations. Disclosure of these factors is
intended to permit the Company to take advantage of the safe harbor provisions
of the PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Most of these factors
have been discussed in prior filings by the Company with the Securities and
Exchange Commission. Although the Company has attempted to list the factors that
it is currently aware may have an impact on its operations, other factors may in
the future prove to be important and the following list should not necessarily
be considered comprehensive.
INDUSTRY CONCENTRATION AND CYCLICALITY. The majority of the Company's
revenue is directly or indirectly related to capital expenditures in the
electronics industry. This industry is highly cyclical and has historically
experienced periodic downturns which often have had a severe effect on capital
expenditures. Several of the Company's customers have recently reported that the
market for capital goods in the electronics industry has deteriorated, which
could effect the Company's order rate in the next few quarters. For the
foreseeable future, the Company's operations will continue to be dependent on
the capital expenditures in this industry which, in turn, is largely dependent
on the market demand for products containing integrated circuits. Although the
Company's products have been, and continue to be, used in a variety of
industries outside the electronics industry, the Company's current product
development and marketing is focused on electronics and its business and results
of operations would be significantly and adversely affected by a slowdown in
this industry.
DEPENDENCE UPON PRINCIPAL OEM CUSTOMERS. The Company's revenue levels
continue to be largely dependent on the order rates of its large OEM customers.
For the six months ended June 30, 1998, two of the Company's customers, Juki
Corporation and Philips Electronics N.V. , accounted for approximately 57% of
the Company's revenues. In addition, the Company's five principal customers
(including Juki and Philips), in aggregate accounted for approximately 71% of
the Company's revenues for such period. During the second quarter, the Company
was notified by its largest OEM customer that there would be a reduction in its
third quarter order rate, resulting in reduced revenue levels in the third
quarter of 1998 when compared to the third quarter of 1997 and the second
quarter of 1998. Theloss of, or a significant curtailment of purchases by, any
one or more of these OEM has a material adverse effect on the Company's results
of operations.
DEPENDENCE ON OUTSIDE CONTRACTORS AND SUPPLIERS. The Company currently
contracts with third party assembly houses for a substantial portion of the
purchase and assembly of components of its products. Although the Company
endeavors to inspect and internally test most components prior to final
assembly, reliance on outside contractors reduces its control over quality and
delivery schedules. The failure by one or more of these subcontractors to
deliver quality components in a timely manner could have a material adverse
effect on the Company's results of operations. In addition, a number of the
components used in the Company's products are available from only a single
supplier or from a limited number of suppliers. Some of these components have
relatively long order cycles, in some cases over six months, and the timely
availability of these components to the Company is dependent on the Company's
ability to develop accurate forecasts of customer volume requirements. Any
interruption in or termination of supply of these components, or material change
in the purchase terms, including pricing, of any of these components, or a
reduction in their quality or reliability, could have a material adverse effect
on the Company's business and results of operations.
<PAGE>
PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY. The Company relies
heavily on its proprietary hardware designs and software technology. Although
the Company uses a variety of methods to protect its technology, it relies most
heavily on patents and trade secrets. There can be no assurance that the steps
taken by the Company will be adequate to deter misappropriation of its
technology, that any patents issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
a competitive advantage to the Company. In addition, there remains the
possibility that others will "reverse engineer" the Company's products in order
to determine their method of operation and introduce competing products or that
others will develop competing technology independently. Any such adverse
circumstances could have a material adverse effect on the Company's results of
operations.
As the number of its products increases, the markets in which its
products are sold expands, and the functionality of those products grows and
overlaps with products offered by competitors, the Company believes that it may
become increasingly subject to infringement claims. Although the Company does
not believe any of its products or proprietary rights infringe the rights of
third parties, there can be no assurances that infringement claims will not be
asserted against the Company in the future or that any such claims will not
require the Company to enter into royalty arrangements or result in costly
litigation.
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent upon the
technical expertise, management and leadership of Dr. Steven K. Case, Chairman
and director of the Company and Steven M. Quist, President and director of the
Company, as well as other members of the Company's senior management team, many
of whom would be difficult to replace. Although the Company has a $2,000,000
key-man insurance policy on Dr. Case and Mr. Quist and has retained other
experienced and qualified senior managers, the loss of the services of Dr. Case,
Mr. Quist or other key personnel could have a material adverse effect on the
Company.
TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT. The market for the
Company's products is characterized by rapidly changing technology. Technologies
employed in the circuit board production industry, particularly the surface
mount portion of the industry, continue to change rapidly and new technology
could cause a portion of the Company's products to become obsolete at any time.
Accordingly, the Company believes that its future success will depend upon its
ability to continue to develop and introduce new products with improved price
and performance. In order to develop such new products successfully, the Company
is dependent upon close relationships with its customers and their willingness
to share information about their requirements and participate in joint
development efforts with the Company. There can be no assurance that the
Company's customers will continue to provide it with timely access to such
information or that the Company will be able to develop and market such new
products successfully and respond effectively to technological changes or new
product announcements by others.
INTERNATIONAL REVENUE. In the years ended December 31, 1995, 1996, and
1997 and the six months ended June 30, 1998, sales of the Company's products to
customers outside the United States accounted for approximately 69%, 70%, 68%
and 81%, respectively, of the Company's revenue. The Company anticipates that
international revenue will continue to account for a significant portion of its
revenues. The Company's operating results are subject to the risks inherent in
international sales, including, but not limited to, various regulatory
requirements, political and economic changes and disruptions, transportation
delays, difficulties in staffing and managing foreign sales operations, and
potentially adverse tax consequences. In addition, fluctuations in exchange
rates may render the Company's products less competitive relative to local
product offerings. There can be no assurance that these factors will not have a
material adverse effect on the Company's future international sales and,
consequently, on the Company's operating results.
<PAGE>
COMPETITION. The Company competes with other vendors of optical
sensors, with vendors of machine vision systems, and with the internal
engineering efforts of the Company's current or prospective customers, many of
which may have greater financial and other resources than the Company. There can
be no assurance that the Company will be able to compete successfully in the
future or that the Company will not be required to incur significant costs in
connection with its engineering research, development, marketing and customer
service efforts to remain competitive. Moreover, the Company's principal
customers operate within the electronics industry, which is highly competitive
and highly dependent upon its suppliers' ability to provide high quality, cost
efficient products. Competitive pressures may result in price erosion or other
factors which will adversely affect the Company's financial performance.
QUARTERLY FLUCTUATIONS. The Company has experienced quarterly
fluctuations in operating results and anticipates that these fluctuations will
continue. These fluctuations have been caused by various factors, including the
capital procurement practices of its customers and the electronics industry in
general, the timing and acceptance of new product introductions and
enhancements, and the timing of product shipments and marketing. Future
operating results may fluctuate as a result of these and other factors,
including the Company's ability to continue to develop innovative products, the
introduction of new products by the Company's competitors, the Company's product
and customer mix, the level of competition and overall trends in the economy.
POSSIBLE VOLATILITY OF STOCK PRICE. The Company believes that factors
such as the announcement of new products by the Company or its competitors,
market conditions in the electronics and precision measurement industries in
general and quarterly fluctuations in financial results could cause the market
price of the Common Stock to vary substantially. In recent years, the stock
market has experienced price and volume fluctuations that have particularly
affected the market prices for many high technology companies and which often
have been unrelated to the operating performance of such companies. The market
volatility may adversely affect the market price of the Company's Common Stock.
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